CBRS private networks are attracting investor attention

Private-equity investors are running the numbers on shared CBRS enterprise networks, which are expected to create new opportunities for so-called neutral host providers. Neutral hosts own and operate network assets and are paid by carriers and/or enterprise customers for the use of their networks.

Clayton Funk, managing director at MVP Capital, said private-equity firms are interested in CBRS because it can support connectivity as a managed service. “Connectivity will be outsourced to companies who have expertise in it, and there is a ton of private equity interest in that model because it’s sticky revenue, it’s recurring revenue, it’s leverageable revenue,” Funk said. He named Gigamonster and Connectivity Wireless as examples of investor-backed companies that are talking to clients about private CBRS networks.

Eventually, Funk expects private equity investors to back new ventures created to build and manage enterprise CBRS networks. He said Columbia Capital and MC Partners are two private equity firms looking at CBRS opportunities. While there haven’t been many actual deals yet, Funk said he expects it to be a growth area.

Access to spectrum
The FCC’s recently published list of companies that plan to bid for CBRS spectrum this summer included a handful of big corporations willing to pay for priority access to CBRS spectrum. But the vast majority of enterprises will access the spectrum through GAA (general authorized access), meaning that they can use it freely if there is no incumbent or priority access licensee on the bands.

Free spectrum makes CBRS somewhat analogous to WiFi when companies calculate the return on potential network investment. Private-equity investors are looking at models that estimate capital costs, operating expenses and potential revenue associated with enterprise CBRS networks. One such model was created by The Besen Group, a Washington, DC-based consulting firm that specializes in mobile and wireless.

Calculating returns
Besen Group founder Alex Besen said his CBRS model can be used by investors to calculate expected returns under different scenarios. The model calculates expenditures based on several variables, including the number of small cells needed. For example, a 100,000-square-foot stadium is projected to require 10 outdoor small cells, or one per 10,000 square feet, on average. Outdoor small cells are expected to cost roughly $2,000 each (vs. roughly $500 for each indoor small cell), although Besen said prices will vary between vendors. For outdoor small cells, the firm estimates $400 in installation costs, $100 for power over Ethernet and switching, and an additional $150 for other materials needed for each node. Besen estimates network design costs at $300 per outdoor cell.

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